1. Introduction

Corporations Canada is charged with administering the Canada Business Corporations Act, the Canada Corporations Act, the Boards of Trade Act, the Canada Cooperatives Act and several other corporate laws governing federal companies, except for financial intermediaries. These statutes provide the legal framework for the creation and governance of federal corporate entities, so that they can engage in marketplace activities on a for-profit and not-for-profit basis.

At Corporations Canada, our role with respect to Part II of the Canada Corporations Act (CCA) is to:

ensure that the requirements of the CCA have been met, and

assist those involved with a federal not-for-profit corporation during the corporation's existence, including its creation, amendment and dissolution.

However, the vagueness of the CCA presents difficulties. For example, Part II of the CCA provides few answers as to whether particular by-law provisions are acceptable. Historically, this has led to a body of ad hoc, unwritten policy that developed over the years. This was addressed several years ago by developing written policies to provide guidance on what is acceptable or unacceptable when the Act is unclear or silent on a question. The policies reflect past practice and include information on the types of provisions that are acceptable for by-laws. Corporations Canada has also developed a set of model by-laws, which, if adopted for use by the applicant and properly identified on filing, will speed the processing of an application for by-law changes.

Caution:

This or any other policy is not intended to replace legal advice. While the policies discuss certain by-law provisions that are not specifically dealt with (neither explicitly permitted nor prohibited) in Part II of the CCA, Corporations Canada can give no assurance that a court would find any of the particular provisions to be valid under the Act. Accordingly, you may want to consult with legal counsel or other professional advisors prior to making any application under the CCA.

2. For your information

What is a corporation?

A corporation is a legal entity that can sue or be sued or hold property in its own name. A corporation provides a permanent structure through which individual persons or other corporations can act together for a common purpose generally without incurring personal liability for the corporation's debts and obligations.

What is a not-for-profit corporation?

Unlike a business, or more specifically a share corporation where certain shareholders will be entitled to participate in the profits of the company (e.g., by receiving dividends), a not-for-profit corporation, also known as a non-share corporation, has members who are prohibited by the CCA from receiving any pecuniary gain. The purpose of these corporations is not to make money for members, but rather to carry on some activity of a national, patriotic, religious, philanthropic, charitable, scientific, artistic, social, professional or sporting character, or the like.

What is the basic structure of a not-for-profit corporation?

The two basic components of a not-for-profit corporation are the board of directors and the membership.

Under the terms of the general by-laws of the corporation, the board of directors is given the responsibility to manage the affairs of the corporation. In order to do this, they meet together as often as necessary and may delegate certain responsibilities to specified officers (e.g., President or Treasurer) so that routine matters can be taken care of between their meetings.

Under the federal CCA, the membership must meet at least once a year to review the financial statements and associated report of the auditor and to appoint an auditor for the coming year.

Certain actions of the board must be confirmed by the membership (e.g. amendment of the Letters Patent or the by-laws). In many corporations, the membership will have the power to elect or re-elect directors on a regular basis and to remove existing directors, if necessary, in order that the management of the corporation reflects the wishes of the membership.

3. Types of applications

Incorporation

On October 17, 2011, the Canada Not-for-profit Corporations Act (NFP Act) came into force. As of that date applications for incorporation under Part II of the CCA are prohibited. Applications to incorporate a not-for-profit must be made under the NFP Act.

Amendment of letters patent (Supplementary letters patent)

There may be a need for you to change the corporation's Letters Patent. This is done by applying for Supplementary Letters Patent. The changes can be: (1) a change in the name of the corporation listed in the Letters Patent; or (2) a change to any other provisions of the Letters Patent. The procedure varies slightly between these two types of changes.

The submission includes an application for Supplementary Letters Patent and a copy of the special resolution approved by at least 2/3 of the votes cast by the members of the corporation.

Corporations Canada will check that the documents comply with the CCA and other requirements. If acceptable, Corporations Canada will issue the Supplementary Letters Patent. The change to the corporation's Letters Patent is effective on the date set out in the Supplementary Letters Patent.

Further information on completing an application for Supplementary Letters Patent is available in the "Application for Supplementary Letters Patent Change of Name Policy" and "Application for Supplementary Letters Patent to Amend Provisions of Letters Patent Policy".

Amendment of general by-laws

By-law amendments relating to the requirements of subsection 155(2) of the CCA must be submitted to Corporations Canada for approval by the Minister. Such amendments must be approved by the membership before the application is made to the Minister for approval. Further information on completing an application for amendment of by-laws is available in the "Amendment of General By-Laws Policy". Also, see the "Model By-laws Policy".

Amendment to the place of the corporation's head office

There are two situations that apply to a corporation changing the location of its head office. First, a corporation may wish to change the place within Canada where the head office is situated. This requires an application to Corporations Canada and must be supported by a by-law, duly sanctioned by at least 2/3 votes of members cast at a special general meeting of members.

The second situation is when there is a change of street address within the same place described in the Letters Patent. This type of change requires only a resolution of the board of directors. For example, a corporation might move from 123 Main Street, Ottawa to 123 Bank Street, Ottawa, with Ottawa as the place in the Letters Patent. This does not require an application to Corporations Canada. Instead the next Annual Summary that is filed must record the change. The Annual Summary must be filed by June 1 of each year and must set out the corporation's information, e.g. head office address, names and addresses of directors, as of March 31st. In the meantime, a letter to Corporations Canada providing the new address will suffice. If the street address in Corporations Canada's database is not accurate, Corporations Canada will not be able to contact the corporation nor send any reminder notices to file the Annual Summary. Failure to file Annual Summaries for two consecutive years can result in the dissolution of the corporation (section 133 of the CCA).

Further information on changing the place where the head office is situated is available in the "Amendment to the Place of Head Office Policy".

Surrender of charter and dissolution

A not-for-profit corporation may cease to exist and dissolve by surrendering its charter. This is done under section 32 of the CCA. Subsection 32(1) applies to a corporation that has been active. Subsection 32(2) applies to a corporation that has not gone into bona fide operation or has been inoperative for three or more consecutive years. Further information on completing an application for surrender of charter is available in the "Surrender of Charter and Dissolution pursuant to subsection 32(1) Policy" and the "Surrender of Charter and Dissolution pursuant to subsection 32(2) Policy".

4. For your information

Registered charity status under the Income Taxt Act

The Income Tax Act allows corporations that are established and operated for charitable purposes to register with the Canada Revenue Agency (CRA) as charities. Registration with CRA allows a corporation to issue official tax-deductible receipts to those who contribute to their cause and, in many cases, is necessary to qualify for exemption from tax on its income. Being incorporated as a not-for-profit corporation under the CCA is not sufficient by itself to be considered a registered charity for the purposes of the Income Tax Act.

Information on, and the application form for, charitable registration can be found on the CRA website or may be obtained by contacting:

If your corporation intends to become a registered charity, it is suggested that you make your application to become a registered charity prior to or at the same time as you file your application for incorporation. Otherwise, the corporation may have to make an application for Supplementary Letters Patent if CRA requires changes during the charitable registration process.

Keeping your corporation in good standing

Annual meeting

All corporations, both large and small, must hold at least one annual meeting of members every calendar year and not more than 15 months after its previous annual meetingFootnote 1. The directors may also call special general meetings of members. While any topic affecting the corporation can be discussed, the annual meeting must at least address the following:

presentation of the financial statements;

consideration of the auditor's report;

appointment of the auditor; and

election of directors, if applicable.

Annual financial statements

Each corporation is required to prepare annual financial statements for examination by the auditor. These statements will be presented to the members at the annual meeting along with the report of the auditor.

Auditor

All corporations are required to have an auditor. The auditor must be appointed by the members at each annual meeting. Unless all of the members agree otherwise, the auditor must be independent of the corporation and therefore cannot be a director, an officer or an employee of the corporation or any of its affiliates.

The auditor is required to make an examination of the accounting records and the financial statements. The auditor must report to the members on the examination at the annual meeting. The auditor must state whether the financial statements fairly present the financial position of the corporation and the results of its operations during the past year.

Annual summary

A not-for-profit corporation must file an Annual Summary, along with the $30 filing fee, with Corporations Canada. It must be filed between March 31st and June 1st of each year, containing information regarding the corporation as of March 31st in the same year. A blank Annual Summary form can be obtained from Corporations Canada's website. Failure to file for two consecutive years can result in the dissolution of the corporation (section 133 of the CCA).

Failure to submit the $30 filing fee will result in a notation being placed on Corporations Canada's website indicating that the Annual Summary for the particular year was filed without the fee. Corporations Canada will also forward a Notice of Default to you stating that until you pay the filing fee, the corporation has not fulfilled its obligation. Failure to file and/or to pay the filing fee for two consecutive years can result in the dissolution of the corporation (section 133 of the CCA).

Record keeping

The corporation is to keep the following records in the custody of the secretary or another officer specially charged with that duty (sections 109 and 112 of the CCA):

a copy of the Letters Patent, any Supplementary Letters Patent and all by-laws of the corporation;

the names of all persons who are or have been members;

the address and occupation of each such person while he/she is a member, as far as can be ascertained;

the names, addresses and occupations of all persons who are or have been directors, and the dates upon which each became or ceased to be a director; and

minutes of all members' and directors' meetings.

The corporation is also required to keep adequate accounting records at its head office (section 117 of the CCA).

Investigations by Corporations Canada

Corporations Canada can investigate alleged contraventions of the Act by a not-for-profit corporation. Decisions about whether to investigate will be guided by the following:

The CCA, which is fundamentally unchanged since 1917, does not provide access to many of the remedies that are available in other more modern corporate statutes. Please recognize therefore that Corporation Canada's abilities to remedy contraventions of the Act are limited.

Private disputes that are primarily between members, directors and their corporation are encouraged to be resolved privately. The CCA provides aggrieved parties with the ability to seek redress from the courts. For example, section 157.1 of the CCA incorporates by reference section 229 of the Canada Business Corporations Act that allows members of a corporation to apply to court for an order directing an investigation into the affairs of the corporation. In these situations, complainants are encouraged to consult a lawyer in order to determine their options.

While an alleged contravention of a statutory provision is considered a serious matter, Corporations Canada has a responsibility to the Canadian public to ensure that public resources are used appropriately. The decision to pursue an allegation of non-compliance will be made in accordance with this responsibility.

Footnotes

Footnote 1

The first annual meeting of members be held within eighteen (18) months of incorporations